October 5, 2023 • 41 mins
MapableUSA.com: Raising capital is quick, inexpensive, and easy, right? If you believe that, then you're really going to want to listen to this podcast where Mike Brette - the CEO of Small Cap Equity Advisors - debunks some myths of crowdfunding, and explains why so many fail at raising money, as well as providing some pointers on how to do the entire process the correct (and legal) way.
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Episode Transcript
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(00:23):
And welcome to the Memamo USA podcastwhere we put you on the Map,
which is Ron Costa broadcasting from thelovely state of New York. We're doing
a mobile podcast again today and we'regonna be talking about, uh, you
know, ways of quick quick cash, actually quick tips on raising capital.
(00:43):
And to do that, let's introduceVicky hutch Mala from the World Talking Market.
Vicki, how are you doing today? I'm great, Ron, I'm
so excited and it's been a longtime since we did a podcast, so
this is fun. It's exciting,and we're talking to one of our favorite
people, one of our guests todaythat we like very much, very informative,
(01:06):
and I think it's going to begreat, so we might as well
get started. We are starting thisnew season off real strong, so let's
continue that. And let's introduce MikeBrett, the CEO of Small Cap Equity
Advice. W's been on a showmany times. Mike, how are you
doing today? I'm doing very well. Thanks for the opportunity, ron I
Trothy always podcasts they're great, Yeah, they're really really great. And like
(01:30):
I said I said in the lastpodcast, every time we have you on,
Mike, it's like everybody's like,I gotta get that guy on more
often. So you're the first personwho went to for the new season,
and there you go. So we'rein our second episode and we're really psyched
about having you on, and Iknow we've got a lot to talk about
crowd funding wise and raising money.So before we get started as usual,
(01:51):
let's give a quick overview of Mikeof what you're doing and how you got
into the business and everything. Yeah, I've been in this thirty years helping
companies raise capital go public, eitherOTC market or Nasdaq, or if they
want to uplist a Nasdaq. We'vedone that several times. So we also
(02:15):
are consultants and advisors to companies sowe can steer them in the right direction.
I get a lot of emails andphone calls on a weekly basis for
people that just don't really know howto raise capital. So one of our
services we provide is counseling and kindof set them in the right direction.
And you know, we've been Isaid, we've been in business thirty years.
(02:38):
We have a lot of contacts withinvestment banks and family offices, broker
dealers, and you know, weknow how to do things the right way
and make sure everybody gets started onthe right foot. That's kind of what
I'd like to do on the showhere today is kind of offer some insights
to companies or individuals who are eitherracing capital for the first time time or
(03:00):
maybe second or third time, butthey're not sure how to do it legally.
Yeah. A lot of times theseguys have not been successful the first
time where they're scared or whatever itis. They need this information and there's
the right way to do it andthe wrong way to do it. So,
uh so today let's let's let's takeeveryone through the right way. Yeah.
(03:20):
The first thing that people need toconsider, the first thing they need
to consider and they need to talkto their uh security lawyer, is what
is what's what does the SEC considerto be a security? That's the first
thing. Because I get a lotof calls, well, we're offering a
convertible note, we're offering promisory notes, we're offering this, we're offering that.
(03:42):
So it's not a security. Yes, it is if you read the
SEC information almost anything under the sun. If if you're selling some kind of
interest to somebody in exchange for moneyand they're relying on you to make them
a return. That's a security.So the reason I bring that up is
(04:03):
there's only two ways of legally raisingcapital. You either have to have a
direct registration with the SEC or youfile one of the exemptions under the Jobs
Act like Reggae plus reg D orForm C. Those are the only two
legal ways. You have to havea registration or file exemption. And I
(04:26):
get this all the time from well, we know, we don't want to
do that. We're trying to raisemoney, not spend money. We don't
have an attorney, you know,on and on, one excuse after the
other, and it's either look,you pay now to do it the right
way, or you're going to paya lot more later on because you did
the wrong way. So, youknow, people think they can use a
(04:48):
business plan or a deck and youknow, send that out on social media
or email and then take checks frominvestors. That's illegal. You can't do
that. So those are some ofthe elements you know, you know I
tell people about or discussed. Andthe second one is the first rule you
(05:10):
have to understand in raising capital.There are no investors or groups of investors
waiting out there to write you acheck. It's a myth, that's it's
only it's something. Yeah, it'ssomething that the internet, you know,
the Internet you know, puts outor people reading the media or something where
they get this idea that there's somebodyout there willing to write you a check
(05:33):
even if they don't know you.That is not correct. You know,
investors are smart, they're educated,they know what they want, and it
depends you have to give them whatthey want. You have to structure your
deal like they want it. Inother words, Uh, the reason they
have jobs, the jobs acted withReggae Plus is there's liquidity in there for
(05:59):
the investors right from the get go. In other words, if they invest
in a Reggae Plus offering, they'regetting free trading stock, which if they
run into a buying financially six monthsdown the line, they can sell that
without any further effort on your partyissue, or they can sell it and
exchange it, do whatever they wantto get liquid again. And most other
(06:19):
offerings you can't do that. Sothere are some rules that people have to
follow and be aware of so theycan discuss it with their attorney. Well,
let's let's talk about that a littlebit more. First of all.
You mentioned the why how is ita security? That's that's referred to as
the Howie test? Is that right? Well, that's one. That's one
(06:40):
test that's mainly for tokens, cryptocurrencies, and things of that nature that a
lot of people have been snagged withthe SEC. They use the Highway test,
which basically says, look, ifyou're putting money in and somebody else
is going to work a deal tomake you money, yeah, that's a
security needs to be registered. Butwhat I'm talking about is just in general
(07:02):
and specific terms, if you're outthere raising money, the SEC does not
care what you call the offering,and they don't care what your lawyer called
the offering. The SEC says,it's a security. We're coming after you.
You didn't file a registration or anexemption from registration. We don't care
(07:25):
what you have to say. Imean, you can call it anything you
want, and the SEC is goingto say, Nope, it's a security
and easily win ninety nine percent ofthe time. You know, if you've
done it wrong and haven't followed therules, you know you're going to have
a real problem with state federal regulators. So the Howie test is one for
crypto and tokens and things of thatnature. But it still holds true for
(07:49):
any other type of offering. Ifyou're selling equity in your company, or
if you're giving somebody a convertible notewhich converts into equity, that's a security.
If you're selling promissory notes, LLCinterests, on and on and on.
I mean, the list is almostendless. What the SEC calls the
(08:09):
security. But you'd be surprised howmany people out there trying to raise money
who don't don't have a clue thatthey that they are violating state and federal
security laws. Yeah, unfortunately,I wouldn't be surprised about that because I
see it all as well. Butall these guys think that they found a
quote loophole, right, You hearthat all the time with these guys.
(08:30):
Now. Now, now when yousay you know the SEC comes after you,
what do they What can they do? I mean, obviously they could
shut you down whatever, But yeah, well, I mean, well,
all all of the above. Ifthe state regulators and the SEC, if
they decide to come after you withan enforcement action, depending on the level
(08:50):
of violation that you have, theycan close down the offering. Number One
there's the right of recision for investors, which means every investor that put money
into into your deal can cancel theinvestment and demand their money back. The
SEC can also file civil and criminalcharges against all the officers, all the
(09:16):
directors, any kind of finders thatyou might have used, any board of
directors, anybody involved with aiding anda betting. The violation of the security
law can be you know, snaggedin the net that the SEC puts out
there. Now, the SEC can'tprosecute criminally, but they can refer it
(09:39):
to the attorney or the US attorneyin the specific state if they want to,
you know, I mean, thelist goes on and on what they
can do, but it really comesdown to what's hih egregious vois or violation
you know they got. Like Isaid, they could just file the civil
complaint gives you, but they'll close. You're offering down for sure, and
(10:03):
they're going to make you give backall the money. Now, the problem
with most people raising capital, ifthey're raised a million dollars, they've already
spent a million dollars. So ifyou're required to give the money back to
investors, you don't have it.So that's another problem you got to face.
So they're I mean, they havesecurity laws for a reason, to
protect investors. That's the main importanceof security laws is to protect the investors.
(10:31):
You have to give a disclosure documentto them. You have to disclose
all material information. You have tomake it clear and understandable what they're investing
in. And even under like regD five oh six, you're not required
to have a PPM. But Imean that statute says that. But I
(10:52):
don't know if any anybody out there, any securities are or professional who doesn't
insist on a PPM, because aPPM puts everything down in writing what the
risks are that the investor signs itand says, I understand the risk.
I can lose all my money.I can survive without the money. I
(11:13):
know, I'm not in the titleof the refund. The blob goes on
and on and you're disclosing everything.So to try to go out there and
raise money without a proper registration forthe proper documents, I mean, you're
playing Russian roulette, right, youknow, Mike, Mike, we know
that there's under the Job Acts,we know that there's regulation a regulation D
(11:41):
and regulation CF. I would imaginethat each one of those platforms is geared
towards certain industries that can use thembetter to their advantage. Why can you
tell us the difference between those threeand who is more uh, which which
platform works for which industries so theycan choose. Yeah, good question.
(12:07):
Let's take the crowdfunding reg CF first. That really is for a startup trying
to raise let's say two hundred andfifty to five hundred thousand, even though
they're allowed to raise up to fivemillion dollars under the new regulation. You
know, the crowdfunding CF is reallyfor startup for the main reason is,
(12:28):
first off, you have to fillout Form C which is like a mini
perspective. The form is supplied bythe SEC. That's a disclosure document that
has to be filed. And thenonce the SEC gives you the green light
you need to You're required under thestatute to upload your business plan, your
(12:50):
form CE, videos, any salesinformation to platter too. You've got to
upload that to an SEC approved fundingportal. And under reg CF, you
as the issuer cannot raise capital throughyour website or meetings or anything like that.
It all has to be raised throughthe platform, and your ability to
(13:11):
advertise is very limited. Under REGsCF. You can put out a tombstone
ad which you can give the andyou have to give the the link to
the funding portal, and so theinvestor looks up the link, goes to
it and then it has the financinghas to be closed by the portal and
(13:31):
investors get restricted stock. So that'skind of an overview of the CF.
Now. Regulation D five O sixC is relatively new with the jobs as
it allows UH companies to raise capitalan unlimited amount of capital and issue the
(13:54):
investors receive restricted stock, and we'llgo into that at a minute. They
have to file Form D with theSEC, which again is just about a
four page document. There's no approvalof that, there's no fee, but
they have to file that within fifteendays of getting their first check. Now,
the reason some companies prefer the regD five oh six is they can
(14:18):
go after they can they can alsoadvertise and market to the general public,
but they can only take capital fromaccredited investors. Non accredited investors are excluded.
So what you're doing under that isyou're eliminating about ninety percent of your
investor pool. Because most people arenon accredited, and so the accredited status
(14:43):
is very sophisticated individuals, individuals,institutional money. So with under reg D
you'll kind of eliminate a lot ofyour potential investors. Now reg A kind
of takes up the slack of allthose other two offerings I just mentioned Under
Regulation A, once you file Formone A with the SEC again, which
(15:07):
is like a mini perspective, butit's very detailed, the SEC qualifies the
offering, which means you can starttaking money. Prior to the qualification by
the SEC. You can start advertisingand marketing your regga to accredited and non
(15:28):
accredited investors. So now you've gota wide pool of investors to look at
your deal. But prior to beingqualified by the SEC, the only thing
you can do is get indications ofinterests from investors. You can't take their
checks, you can't take any moneyuntil the SEC qualifies. So the importance
(15:50):
of that is if you do itcorrectly, you can get a lot of
interest in your offering, and thenwhen the SEC qualifies the offering, you
can go back and contact those investorsand then say, okay, we're ready
to go. Here's some information.Let's let's talk about a deal in investing
money. So Reggae allows you toadvertise and market to the general public,
(16:14):
to accredited non accredit investors. Youcan raise up to seventy five million dollars
every twelve months with a Tier twooffering, and you know, the investors
get free trading stock. The otherside of that is, if you decide
you want to go public, youcan use Reggae Plus as a vehicle to
(16:34):
get listed on OTC or Nasdaq ifyou can qualify. So I prefer the
Reggae offering. It's it costs alittle more in legal fees and you have
to have an audit if you're goingto do Regae Tier two. But in
the long run you you have alot of benefits to reggae over crowdfunding CF
(16:57):
and over the reg regulation do youoffering. Well, you know, Mike,
it appears from what I have observedlimitedly observed, it appears that the
primary reason that crowdfunding launch isn't successfulis because people don't realize how difficult it
(17:22):
is and how absolutely you need tohave expert advisors and consultants to take you
and help you get to where you'regoing, because you can't do it on
your own, and you can't doit if you don't market yourself. So
people are excited to invest in you. Yeah, that's a good point,
(17:45):
Vicki. And that's that's the bigmyth that's out there a lot of these
companies that well, let me giveyou some statistics. First off, ninety
of startups fail in the first twelvemonths, and the rest of them fail
soon after. Sixty to eighty percentof companies fail to raise money in twelve
(18:07):
months. And the reason the failurerate is so high is these companies do
not understand the process of raising money. Like I said at the top of
the show, there are no investorsout there waiting to write you a check.
You need to find your own specificinvestors for your specific deal. Just
(18:29):
because somebody invested in something doesn't meanthey're going to invest in everything. So
if you're if you're approaching technology investorsand you've got a cannabis deal, you're
wasting your time. So you've gotto go after and find specific investors who
are interested in your sector. Nowhow do you do that, Well,
(18:51):
first off, you don't buy alist of investors. You see it on
LinkedIn and all these social media sites. We've got a list. We have
a lit so five hundred investors youcould buy. Well, you know,
there's thousands of people that will fallfor that and buy that list, And
all they're going to do is spampeople on that list, and those people
are going to get really upset thatthey're receiving all these cold, generic emails
(19:15):
saying, hey, I got adeal, invest in it. That doesn't
work. It's a waste of timeand money. What people have to do
is they have to, like youmentioned, Vicki, they have to have
a marketing budget, a PR budget. They need to put out press releases.
They need to do podcast interviews likewe're doing here, television interviews,
(19:37):
YouTube videos. They need to getinvestors interested enough the investors are contacting them
and requesting their package or their information, and that's how you raise money.
These companies that have raised money havea built in network of in vendors,
vendors and people that they know thatthey can raise capital online. Now,
(20:03):
the other miss the other misnomer isthat these funding portals can market you're offering
for you. That's absolutely false.If the SEC does not allow a funding
portal to market your specific offering overanybody else's what these funding portals promote is
(20:26):
we have forty thousand investors. No, they don't. What they have is
forty thousand people that signed up ontheir website to look at deals, and
they're going to look at thousands ofdeals, not just yours. So getting
back to your point, VICKI,if somebody's trying to raise capital under Reggae
REGCF or reg D, once theyfollow the legal paperwork and the filings and
(20:49):
everything like with the SEC and thestate, they need to have a marketing
budget to reach out to investors andmake them aware of what they're doing and
about the offering. Without that,they're going to fail exactly exactly because you
can't do no matter how great yourcompany is or your product or whatever,
(21:11):
if nobody knows about you, nobody'sgoing to invest in you. And they're
not going to invest in you ifthey know about you, unless you've touched
them in an emotional way that getsthem excited, that gives them an anticipation
to not only invest with you anduse reggae D or CF, but that
(21:32):
will cause them to tell their friendsand associates and their connections and relationships,
look at this great deal. Soyou know, if you don't do that
in the first place, you're notgoing to get that in the second place,
and nobody can do it for you. We've found in the podcast that
we've done, and we've done abouttwo hundred of them. Our guests are
(21:56):
CEOs and founders of companies because theyare the ones who have the most passion
about their company to be able tosell it to whoever is listening to our
podcast. You know, if you'rethe owner, you're the one with the
most to lose, So you've gotthe most passion to sell your company,
(22:18):
not somebody that you hire who's promisingyou the world. They're not going to
do anything for you because they gotten thousand other people they promise the same
thing to right right. Well,the other thing too is investors. I've
been doing this for thirty years.Like I mentioned at the top of the
show, investors do not invest withstrangers. If they don't know who you
(22:41):
are, if they've never met you, they're not going to write you a
check for five hundred thousand dollars ora million dollars, just not going to
happen. Now, the companies thatdo these crowdfunding online, they're they're taking
minimum investments of one hundred dollars tofive hundred dollars. Yeah, all right,
if that's what you want to doto raise a few hundred thousand dollars,
you know, it might work ifyou have a proper marketing budget.
(23:04):
But if you're after if you're tryingto raise some serious money, five million,
ten million on up, investors arenot going to write you a check
because of some online information that theysaw, or an email or even a
zoom meeting. Like I said,I've been doing this thirty years. I've
(23:26):
never invested in anything where I haven'tmet the founder. I talked to their
vendors, talk to their employees,I visit their location, and I look
at their checkbook, their bank statements, not just financials, but the bank
statement. I want to know wherethey're spending money, where their checks are
going. I mean, are theyyou know, they're buying a brand new
(23:48):
BMW or you know, Condo andMexico as opposed to running their business.
So I look at the checkbook.So the reason I bring that up is
due diligence is key. So alot of people trying to a lot of
people trying to raise money online arejust fooling themselves that they're going to raise
any substantial Now, I know,I see it all the time where somebody's
(24:11):
raised five million and ten million.That's an exception to the rule. It's
not reality. So for ninety percentof the companies out there, if you're
trying to raise some serious money,you're going to have to have number one,
a marketing budget to get investors tocontact you. You're going to have
to fly to meet the investors orhave them come out and see you if
(24:34):
that's what they want to do.You're going to have to have And this
all requires a one on one meeting. These pitch events that you see all
the time, Angel pitch events coming, you know, pa us five thousand
dollars and you could present to hundredsof investors. That's a bunch of crap.
I've gone to those meetings, andthe reason I've gone there is to
(24:56):
meet other investors, not that notto invent and somebody pitching me. You
know, I go They're to meetYeah, well the investors, although Mike
sometimes they do have good lunches,yeah, yeah, they have none in
the cocktails cocktails too, Yeah,But I mean, like I said,
I've been in this thirty thirty yearsand I've gone to a lot of those
(25:18):
pitch meetings, but only to meetother investors and to discuss current deals that
we're all involved with. None ofus ever write a check to somebody who
pitched us at a meeting or soonafter the meeting. It's just a complete
waste of time. You've got todo this on a one to one basis
in person. If you're trying toraise substantial amounts of money, like I
(25:40):
said, half a million to amillion dollars or more from one investor,
it's not going to happen over theinternet. So to Vicky's point, marketing
is key. Dealing with professionals areis a key element, and getting the
word out there so that investors trustyou. If they don't trust you,
(26:00):
they're not going to invest with you. They need to know, yeah,
they need to know how you're gonnamake money, so they understand how they'll
make money and get the return totheir money their investment capital. So there's
only one way to do that.That's face to face, shaking hands,
looking somebody in the eye. Investorsdo not want to be pitched and they
(26:22):
don't want to be sold. LikeI mentioned early in the show, investors
are educated and they're smart. Theyknow what they want. So all this
junk that you read on the internet, in some of these social media sites
is just that it's junk. It'sit has nothing to do with reality.
It's somebody trying to sell a courseor a list of so called investors,
(26:45):
but it's not reality. Right,kind of takes it, kind of takes
advantage of ignorance, doesn't it.Oh yeah, yeah, I mean,
well, people are looking. Peoplethink raising money is quick, cheap and
guaranteed and easy, and that's that'sanother that's another myth out there. It's
(27:07):
not it's none of the above.You've got to spend money to make money
or to raise money. In otherwords, you've got to pay legal fees,
you got to pay accounting fees,you got to pay pr fees,
marketing fees. And you'd be surprised. I get contacted weekly for people that
are broke that don't want to spendanybody that don't They don't have a legal
offering. Number one, they spenta few thousand dollars to get a fancy
(27:30):
deck put together, and they thinkthat's the tool they can raise money with.
You can't see legal. The otherthing is they they think they can
hire unlicensed finders to go out insource capital and then pay them a commission
or a success fee if the findergets an investor. That's another myth.
(27:52):
It's illegal. First off, unlicensedfinders can't do anything. They can't post
anything on social media. They can'tsend any your material out to anybody,
they can't email anybody, they can'tcall anybody and discuss your deal, and
they cannot advise somebody that it's agood deal. And this is the big
(28:17):
element. They can't conduct due diligence. I see this all the time.
Well, I have a finder who'sdoing due diligence? I said, is
he a licensed broker dealer? No? I said, he can't conduct due
diligence. So the point of bringingthat up is why mess around with a
finder when you run a follow ofsecurity state and federal security laws using a
(28:37):
finder. I mean those are atthe top of the hour. I answered
Ron's question. If the SEC comesafter you, what can they do?
Well, if you use a finderand he's not licensed a lot of broker
dealer investment bank, you've got someserious problems, not only for you,
the issuer of course the finder canbe sucked into it also, but other
(29:00):
usters who got into the deal usingworking with that finder, they also face
problems. So it's a can ofworms. But to your point, VICKI
people are out there trying to raisemoney. They don't know what they're doing.
They think it's fast and cheap,uh guarantee financing, that they put
something up on the internet or socialmedia or a portal or whatever, that
(29:25):
the money is just going to flowin. It's just not reality. Yeah,
and it's that thing that so manypeople fall in that trap. Yeah,
well, you know, Mike,uh, Mark Cuban never never returned
my email, Mark Cuban, Soyou're right, oh yeah, but yeah,
(29:47):
mean do you think that's do youthink that like shows like like shark
Tanks and things like that and allthese things that you see online with these
quote success stories they I think itcontributes to the idea that it is easy
to do, and I think that'swhat a lot of people. Yeah,
yeah, I hear that all thetime from potential people. Well you know,
we tried shark tank or something likethat, and you know, it
(30:08):
just doesn't work. I Mean,shark Tank's there for entertainment, that's that's
really it. And you know,I haven't even watched the show and except
just clips here and there, andI mean, to me, it's you
know, it's entertainment. It's notreality. Investors, real real investors do
not advertise that they're investors. It'salmost like a closed I don't want to
(30:32):
say secret or anything like that,but investors don't put the word out there
like, hey, I got tenmillion dollars to invest send me your deal.
You know. That's typically that's typicallya finder, you know, and
somebody doing factory or bank loans orsomebody somebody else. It's not a real
investor. So again to Vicky's point, people are just uneducated and ignorant.
(30:57):
I hate to use that word,but that's what it comes down to.
And when I try to point outto them what they need to do to
stay out of trouble and what it'sgoing to cost to do it with legal
fees and accounting and everything, it'slike, oh, no, I know
somebody that did it, you know, didn't do all. Well wait a
(31:19):
minute, okay, okay, justbecause somebody did it, violated security laws
and got away with it, doesn'tmean it's legal. Just means they haven't
been caught yet. You know,it's like robbing a bank. You rob
a bank and get away with it, doesn't make it legal, you know,
just you have been caught. Soit's to me it's not worth it.
(31:41):
The jobs app is there for areason. Security laws are there for
a reason. You need to ifyou're raising capital, you need to follow
the rules, and that requires payingthe price to get out there and raise
the money. But it's not aguarantee. I mean, I get this
again. I get a call fromsomebody and they say, can you guarantee
(32:02):
that you'll raise US five million dollars? No, I said, did it
lawyer that put together? Did thelawyer put together your PPM and charge you
twenty five thousand dollars? Did heguarantee that that PPM is going to raise
you money? Well? No,all right, there is no guarantee.
But if you know the one guaranteeit is if you don't, if you
don't try to do it, you'regoing to fail. So I mean you
(32:27):
need to get out there and takethe first step and again having a proper
legal document, complying with state andfederal security law. And this is the
other When I say state if youif you're raising money, each state has
a blue sky requirement that you haveto file in the station you're raising money
(32:49):
and where that investor is located.Now, under some offerings like reggae,
there are exemptions from the blue SkyYou just have to do a notice file.
They can pay a small fee,a few hundred bucks. Other states
require a review of your offering tomake sure it complies with their state security
laws. And you know, Imean that review process go on and on.
(33:14):
So there are state requirements in additionto federal requirements. And again you'd
be surprised how many people don't realizethat. And there are states out there
like Texas, Florida, New Jersey, I think Alaska. There's about seven
or eight states out there that you, as the issuer, cannot raise money.
(33:37):
It all has to be done througha licensed broker dealer. So if
you're trying to raise money in Texasand Florida and New Jersey, you're out
of luck. If you're trying todo it yourself, you know that's when
the state will come after you foroperating as an unlicensed broker dealer. So
again, rules are there for areason. Follow the rules and enjoy their
(34:00):
raise the money, build your business, and get on with life. Quit
looking behind you. No, absolutely, that's that's right. I think we
are scared straight a lot of theissuers who are probably listening to this podcast.
But I hope so, But Ihope so. I hope so,
but I doubt it. I couldjust see the eyes rolling. If this
(34:20):
was television, people say, ohGod, listen to this guy. Go
on. You know, I don'thave to do that, you know,
I know people that didn't do Yeah, well, you know, go ahead,
but yeah, well, you know, before before we close this out,
Mike, let's let's I got onemore question for you in terms of
Yeah, you mentioned you mentioned videosand press releases and things that you're supposed
to do the right way, right, all right, So when you create
(34:43):
these press releases and you create thevideos and all these other marketing ideas,
uh, they got to go somewhere, right, they got to be where
where where do people go to actuallypost these things? Did they just go
to a major PR service or dothey go to YouTube or or what's what's
the right? Yeah, that's agood point. I mean, well,
first off, you know, thereare public relations firms out there investor relation
(35:07):
firms that can take on the jobof not only producing your media pieces,
but also getting it out there tothe public. Like Fox. I've had
clients to be on Fox Business,interviewed on Fox Business on TV, and
press releases. I don't do thepress releases, but I work with the
(35:29):
company and their lawyers to you know, craft the press release to make sure
it's has all the right information init, no fluff and in everything like
that. And then video like YouTube, you can hire a production company to
produce a nice video and then thatcan be emailed. If you have a
list of people, you can emailit to them or put posted on social
(35:52):
media. So there are a lotof avenues out there for distribution. But
a lot of companies don't know that. I mean, they don't have a
clue that you know they need todo that. I mean, I tell
people again, how was somebody supposedto write you a check? If they
don't know who you are, ifthey don't know what you're offering, I
(36:12):
mean, without right the exposure,it's you're just wasting time. Even if
you put all the legalities together andhave an offering, if you don't have
a marketing budget to reach out toinvestors. You're just wasting your time.
Yeah. I had I had acontact telling me the other day that they
just produced a promotional five minute videoon their latest offering, and he sent
(36:37):
me a link to it, andI looked at it and I feel like
telling them, you know, youshould put this in the CVS pharmacy under
sleeping pills. Yeah it was written. I mean, come on a lot,
Yeah, a lot of people,a lot a lot of entrepreneurs founders
are terrible at public speaking and doinga yeah, doing a video and you
(37:00):
know, if they they should hirea professional to do it. And again
a lot of these companies they thinkthey can just put anything in a video,
true or false, a fluff pieceor a fact. They can just
do anything, and you can't.You've got to be straightforward, factual,
transparent and everything with your information andputting out there. And again that comes
(37:23):
back to the PPM and the legaldocuments that you need. Those are disclosure
documents that tell the investor what they'regetting into. If you're doing that,
but you're also putting out a videothat says the opposite that hey, this
is guaranteed we're going to pay youthirty percent interest. You know, we're
going to do this and this.If you go on and on on your
(37:44):
video and it's not in your PPMand it's not this clo I mean,
you've got a real issue there withregulators. So you know, there's the
right way in the wrong way todo marketing and promotion. And again,
some of these online platforms tell youthat they market you're offering. Again,
they don't. What they do isonce you sign up to do their platform,
(38:06):
they'll refer you to somebody that marketsform. But that's a separate fee.
People don't realize that for every everymillion dollars you're trying to raise,
you have to have ten to fifteenthousand dollars as a budget for every million
dollars you're trying to raise, andif you don't, you're going to fail.
Yeah, speaking of talking to professionals, Mike, uh, how do
(38:30):
people get a hold of you?What's the what's the best way to come
out? I mean, they canthey contact me on my phone nine to
five to one, two three sixeight four seven three. They can email
me Mike Burrett at gmail dot com. They can go to my LinkedIn page
under Michael Barrett see my profile andlook up you know how we how we
(38:50):
do things and what we do,and they can contact me through LinkedIn as
well. Yeah, I think Ithink I'm gonna title this podcast listen to
this podcast or go to jail.Yeah. That's that's that's that that rings
true in a lot of cases,because I mean, I can't emphasize it
enough, and when I talk topeople, it just I could it just
(39:14):
goes in one ear and out theother and then you know, then I
see you on the internet. SECclosed down this, They closed down that
they're going. I mean you seeit all the time in the SEC bulletin,
So closing people down for not havinga registered offering. So it happens.
So this is really good information.Vicky. You want to close us
out with a commodore question. Yeah, this is great. You know,
(39:37):
you want to have a successful business, you got to do certain things.
You got to take the high road, You got to operate with integrity at
all times no matter what. Youhave to be passionate about what you're doing,
about what your business represents and theproduct that you have. And most
important, absolutely most important, hireexpert professionals lawyers see Financial Advisor CPAs to
(40:08):
help you be successful because you cannotdo it yourself. It's the purpose of
Mappable USA. We do podcasts toteach our listeners the right way, to
give them the opportunity to contact theexperts and professionals that everybody needs to have
(40:28):
a successful business. And Mike absolutelyis one of our best guests because he
is an absolute expert when it comesto raising money and he can help you.
He has the right ways to doit. You need to call him
and you need to ask him tohelp you and you'll be successful. It's
a no brainer. Just do it, and we'd like you thanks for that.
(40:52):
I appreciate it. Yeah, Iappreciate that. I enjoy doing the
podcast too, So anytime you needthe guests, just give me a call.
Thanks. Thank you for being aguest on today's show, and Vicky,
thanks for co hosting this with me. And folks are listening to the
Mappable USA podcast at MAPPLEPLEUSA dot com. If just go to our website,
scroll down, you'll see all oursyndication sources and just pick the one you're
(41:14):
like best, subscribe and you'll nevermiss another one of our episodes. Might
be a guest on the show,like Mike Web Today sell off the guest
pad there. We'll see what youcan do about getting you on the show,
and if you like with You're HeartToday, send us an email at
info at mappableusa dot com or justleave a comment on whatever page you listen
to this on right now, Sothanks for your support, thanks for listening.
(41:35):
We'll be at you next time withanother Mappable USA podcast. Have a
great week everyone,
And welcome to the Memamo USA podcastwhere we put you on the Map,
which is Ron Costa broadcasting from thelovely state of New York. We're doing
a mobile podcast again today and we'regonna be talking about, uh, you
know, ways of quick quick cash, actually quick tips on raising capital.
(00:43):
And to do that, let's introduceVicky hutch Mala from the World Talking Market.
Vicki, how are you doing today? I'm great, Ron, I'm
so excited and it's been a longtime since we did a podcast, so
this is fun. It's exciting,and we're talking to one of our favorite
people, one of our guests todaythat we like very much, very informative,
(01:06):
and I think it's going to begreat, so we might as well
get started. We are starting thisnew season off real strong, so let's
continue that. And let's introduce MikeBrett, the CEO of Small Cap Equity
Advice. W's been on a showmany times. Mike, how are you
doing today? I'm doing very well. Thanks for the opportunity, ron I
Trothy always podcasts they're great, Yeah, they're really really great. And like
(01:30):
I said I said in the lastpodcast, every time we have you on,
Mike, it's like everybody's like,I gotta get that guy on more
often. So you're the first personwho went to for the new season,
and there you go. So we'rein our second episode and we're really psyched
about having you on, and Iknow we've got a lot to talk about
crowd funding wise and raising money.So before we get started as usual,
(01:51):
let's give a quick overview of Mikeof what you're doing and how you got
into the business and everything. Yeah, I've been in this thirty years helping
companies raise capital go public, eitherOTC market or Nasdaq, or if they
want to uplist a Nasdaq. We'vedone that several times. So we also
(02:15):
are consultants and advisors to companies sowe can steer them in the right direction.
I get a lot of emails andphone calls on a weekly basis for
people that just don't really know howto raise capital. So one of our
services we provide is counseling and kindof set them in the right direction.
And you know, we've been Isaid, we've been in business thirty years.
(02:38):
We have a lot of contacts withinvestment banks and family offices, broker
dealers, and you know, weknow how to do things the right way
and make sure everybody gets started onthe right foot. That's kind of what
I'd like to do on the showhere today is kind of offer some insights
to companies or individuals who are eitherracing capital for the first time time or
(03:00):
maybe second or third time, butthey're not sure how to do it legally.
Yeah. A lot of times theseguys have not been successful the first
time where they're scared or whatever itis. They need this information and there's
the right way to do it andthe wrong way to do it. So,
uh so today let's let's let's takeeveryone through the right way. Yeah.
(03:20):
The first thing that people need toconsider, the first thing they need
to consider and they need to talkto their uh security lawyer, is what
is what's what does the SEC considerto be a security? That's the first
thing. Because I get a lotof calls, well, we're offering a
convertible note, we're offering promisory notes, we're offering this, we're offering that.
(03:42):
So it's not a security. Yes, it is if you read the
SEC information almost anything under the sun. If if you're selling some kind of
interest to somebody in exchange for moneyand they're relying on you to make them
a return. That's a security.So the reason I bring that up is
(04:03):
there's only two ways of legally raisingcapital. You either have to have a
direct registration with the SEC or youfile one of the exemptions under the Jobs
Act like Reggae plus reg D orForm C. Those are the only two
legal ways. You have to havea registration or file exemption. And I
(04:26):
get this all the time from well, we know, we don't want to
do that. We're trying to raisemoney, not spend money. We don't
have an attorney, you know,on and on, one excuse after the
other, and it's either look,you pay now to do it the right
way, or you're going to paya lot more later on because you did
the wrong way. So, youknow, people think they can use a
(04:48):
business plan or a deck and youknow, send that out on social media
or email and then take checks frominvestors. That's illegal. You can't do
that. So those are some ofthe elements you know, you know I
tell people about or discussed. Andthe second one is the first rule you
(05:10):
have to understand in raising capital.There are no investors or groups of investors
waiting out there to write you acheck. It's a myth, that's it's
only it's something. Yeah, it'ssomething that the internet, you know,
the Internet you know, puts outor people reading the media or something where
they get this idea that there's somebodyout there willing to write you a check
(05:33):
even if they don't know you.That is not correct. You know,
investors are smart, they're educated,they know what they want, and it
depends you have to give them whatthey want. You have to structure your
deal like they want it. Inother words, Uh, the reason they
have jobs, the jobs acted withReggae Plus is there's liquidity in there for
(05:59):
the investors right from the get go. In other words, if they invest
in a Reggae Plus offering, they'regetting free trading stock, which if they
run into a buying financially six monthsdown the line, they can sell that
without any further effort on your partyissue, or they can sell it and
exchange it, do whatever they wantto get liquid again. And most other
(06:19):
offerings you can't do that. Sothere are some rules that people have to
follow and be aware of so theycan discuss it with their attorney. Well,
let's let's talk about that a littlebit more. First of all.
You mentioned the why how is ita security? That's that's referred to as
the Howie test? Is that right? Well, that's one. That's one
(06:40):
test that's mainly for tokens, cryptocurrencies, and things of that nature that a
lot of people have been snagged withthe SEC. They use the Highway test,
which basically says, look, ifyou're putting money in and somebody else
is going to work a deal tomake you money, yeah, that's a
security needs to be registered. Butwhat I'm talking about is just in general
(07:02):
and specific terms, if you're outthere raising money, the SEC does not
care what you call the offering,and they don't care what your lawyer called
the offering. The SEC says,it's a security. We're coming after you.
You didn't file a registration or anexemption from registration. We don't care
(07:25):
what you have to say. Imean, you can call it anything you
want, and the SEC is goingto say, Nope, it's a security
and easily win ninety nine percent ofthe time. You know, if you've
done it wrong and haven't followed therules, you know you're going to have
a real problem with state federal regulators. So the Howie test is one for
crypto and tokens and things of thatnature. But it still holds true for
(07:49):
any other type of offering. Ifyou're selling equity in your company, or
if you're giving somebody a convertible notewhich converts into equity, that's a security.
If you're selling promissory notes, LLCinterests, on and on and on.
I mean, the list is almostendless. What the SEC calls the
(08:09):
security. But you'd be surprised howmany people out there trying to raise money
who don't don't have a clue thatthey that they are violating state and federal
security laws. Yeah, unfortunately,I wouldn't be surprised about that because I
see it all as well. Butall these guys think that they found a
quote loophole, right, You hearthat all the time with these guys.
(08:30):
Now. Now, now when yousay you know the SEC comes after you,
what do they What can they do? I mean, obviously they could
shut you down whatever, But yeah, well, I mean, well,
all all of the above. Ifthe state regulators and the SEC, if
they decide to come after you withan enforcement action, depending on the level
(08:50):
of violation that you have, theycan close down the offering. Number One
there's the right of recision for investors, which means every investor that put money
into into your deal can cancel theinvestment and demand their money back. The
SEC can also file civil and criminalcharges against all the officers, all the
(09:16):
directors, any kind of finders thatyou might have used, any board of
directors, anybody involved with aiding anda betting. The violation of the security
law can be you know, snaggedin the net that the SEC puts out
there. Now, the SEC can'tprosecute criminally, but they can refer it
(09:39):
to the attorney or the US attorneyin the specific state if they want to,
you know, I mean, thelist goes on and on what they
can do, but it really comesdown to what's hih egregious vois or violation
you know they got. Like Isaid, they could just file the civil
complaint gives you, but they'll close. You're offering down for sure, and
(10:03):
they're going to make you give backall the money. Now, the problem
with most people raising capital, ifthey're raised a million dollars, they've already
spent a million dollars. So ifyou're required to give the money back to
investors, you don't have it.So that's another problem you got to face.
So they're I mean, they havesecurity laws for a reason, to
protect investors. That's the main importanceof security laws is to protect the investors.
(10:31):
You have to give a disclosure documentto them. You have to disclose
all material information. You have tomake it clear and understandable what they're investing
in. And even under like regD five oh six, you're not required
to have a PPM. But Imean that statute says that. But I
(10:52):
don't know if any anybody out there, any securities are or professional who doesn't
insist on a PPM, because aPPM puts everything down in writing what the
risks are that the investor signs itand says, I understand the risk.
I can lose all my money.I can survive without the money. I
(11:13):
know, I'm not in the titleof the refund. The blob goes on
and on and you're disclosing everything.So to try to go out there and
raise money without a proper registration forthe proper documents, I mean, you're
playing Russian roulette, right, youknow, Mike, Mike, we know
that there's under the Job Acts,we know that there's regulation a regulation D
(11:41):
and regulation CF. I would imaginethat each one of those platforms is geared
towards certain industries that can use thembetter to their advantage. Why can you
tell us the difference between those threeand who is more uh, which which
platform works for which industries so theycan choose. Yeah, good question.
(12:07):
Let's take the crowdfunding reg CF first. That really is for a startup trying
to raise let's say two hundred andfifty to five hundred thousand, even though
they're allowed to raise up to fivemillion dollars under the new regulation. You
know, the crowdfunding CF is reallyfor startup for the main reason is,
(12:28):
first off, you have to fillout Form C which is like a mini
perspective. The form is supplied bythe SEC. That's a disclosure document that
has to be filed. And thenonce the SEC gives you the green light
you need to You're required under thestatute to upload your business plan, your
(12:50):
form CE, videos, any salesinformation to platter too. You've got to
upload that to an SEC approved fundingportal. And under reg CF, you
as the issuer cannot raise capital throughyour website or meetings or anything like that.
It all has to be raised throughthe platform, and your ability to
(13:11):
advertise is very limited. Under REGsCF. You can put out a tombstone
ad which you can give the andyou have to give the the link to
the funding portal, and so theinvestor looks up the link, goes to
it and then it has the financinghas to be closed by the portal and
(13:31):
investors get restricted stock. So that'skind of an overview of the CF.
Now. Regulation D five O sixC is relatively new with the jobs as
it allows UH companies to raise capitalan unlimited amount of capital and issue the
(13:54):
investors receive restricted stock, and we'llgo into that at a minute. They
have to file Form D with theSEC, which again is just about a
four page document. There's no approvalof that, there's no fee, but
they have to file that within fifteendays of getting their first check. Now,
the reason some companies prefer the regD five oh six is they can
(14:18):
go after they can they can alsoadvertise and market to the general public,
but they can only take capital fromaccredited investors. Non accredited investors are excluded.
So what you're doing under that isyou're eliminating about ninety percent of your
investor pool. Because most people arenon accredited, and so the accredited status
(14:43):
is very sophisticated individuals, individuals,institutional money. So with under reg D
you'll kind of eliminate a lot ofyour potential investors. Now reg A kind
of takes up the slack of allthose other two offerings I just mentioned Under
Regulation A, once you file Formone A with the SEC again, which
(15:07):
is like a mini perspective, butit's very detailed, the SEC qualifies the
offering, which means you can starttaking money. Prior to the qualification by
the SEC. You can start advertisingand marketing your regga to accredited and non
(15:28):
accredited investors. So now you've gota wide pool of investors to look at
your deal. But prior to beingqualified by the SEC, the only thing
you can do is get indications ofinterests from investors. You can't take their
checks, you can't take any moneyuntil the SEC qualifies. So the importance
(15:50):
of that is if you do itcorrectly, you can get a lot of
interest in your offering, and thenwhen the SEC qualifies the offering, you
can go back and contact those investorsand then say, okay, we're ready
to go. Here's some information.Let's let's talk about a deal in investing
money. So Reggae allows you toadvertise and market to the general public,
(16:14):
to accredited non accredit investors. Youcan raise up to seventy five million dollars
every twelve months with a Tier twooffering, and you know, the investors
get free trading stock. The otherside of that is, if you decide
you want to go public, youcan use Reggae Plus as a vehicle to
(16:34):
get listed on OTC or Nasdaq ifyou can qualify. So I prefer the
Reggae offering. It's it costs alittle more in legal fees and you have
to have an audit if you're goingto do Regae Tier two. But in
the long run you you have alot of benefits to reggae over crowdfunding CF
(16:57):
and over the reg regulation do youoffering. Well, you know, Mike,
it appears from what I have observedlimitedly observed, it appears that the
primary reason that crowdfunding launch isn't successfulis because people don't realize how difficult it
(17:22):
is and how absolutely you need tohave expert advisors and consultants to take you
and help you get to where you'regoing, because you can't do it on
your own, and you can't doit if you don't market yourself. So
people are excited to invest in you. Yeah, that's a good point,
(17:45):
Vicki. And that's that's the bigmyth that's out there a lot of these
companies that well, let me giveyou some statistics. First off, ninety
of startups fail in the first twelvemonths, and the rest of them fail
soon after. Sixty to eighty percentof companies fail to raise money in twelve
(18:07):
months. And the reason the failurerate is so high is these companies do
not understand the process of raising money. Like I said at the top of
the show, there are no investorsout there waiting to write you a check.
You need to find your own specificinvestors for your specific deal. Just
(18:29):
because somebody invested in something doesn't meanthey're going to invest in everything. So
if you're if you're approaching technology investorsand you've got a cannabis deal, you're
wasting your time. So you've gotto go after and find specific investors who
are interested in your sector. Nowhow do you do that, Well,
(18:51):
first off, you don't buy alist of investors. You see it on
LinkedIn and all these social media sites. We've got a list. We have
a lit so five hundred investors youcould buy. Well, you know,
there's thousands of people that will fallfor that and buy that list, And
all they're going to do is spampeople on that list, and those people
are going to get really upset thatthey're receiving all these cold, generic emails
(19:15):
saying, hey, I got adeal, invest in it. That doesn't
work. It's a waste of timeand money. What people have to do
is they have to, like youmentioned, Vicki, they have to have
a marketing budget, a PR budget. They need to put out press releases.
They need to do podcast interviews likewe're doing here, television interviews,
(19:37):
YouTube videos. They need to getinvestors interested enough the investors are contacting them
and requesting their package or their information, and that's how you raise money.
These companies that have raised money havea built in network of in vendors,
vendors and people that they know thatthey can raise capital online. Now,
(20:03):
the other miss the other misnomer isthat these funding portals can market you're offering
for you. That's absolutely false.If the SEC does not allow a funding
portal to market your specific offering overanybody else's what these funding portals promote is
(20:26):
we have forty thousand investors. No, they don't. What they have is
forty thousand people that signed up ontheir website to look at deals, and
they're going to look at thousands ofdeals, not just yours. So getting
back to your point, VICKI,if somebody's trying to raise capital under Reggae
REGCF or reg D, once theyfollow the legal paperwork and the filings and
(20:49):
everything like with the SEC and thestate, they need to have a marketing
budget to reach out to investors andmake them aware of what they're doing and
about the offering. Without that,they're going to fail exactly exactly because you
can't do no matter how great yourcompany is or your product or whatever,
(21:11):
if nobody knows about you, nobody'sgoing to invest in you. And they're
not going to invest in you ifthey know about you, unless you've touched
them in an emotional way that getsthem excited, that gives them an anticipation
to not only invest with you anduse reggae D or CF, but that
(21:32):
will cause them to tell their friendsand associates and their connections and relationships,
look at this great deal. Soyou know, if you don't do that
in the first place, you're notgoing to get that in the second place,
and nobody can do it for you. We've found in the podcast that
we've done, and we've done abouttwo hundred of them. Our guests are
(21:56):
CEOs and founders of companies because theyare the ones who have the most passion
about their company to be able tosell it to whoever is listening to our
podcast. You know, if you'rethe owner, you're the one with the
most to lose, So you've gotthe most passion to sell your company,
(22:18):
not somebody that you hire who's promisingyou the world. They're not going to
do anything for you because they gotten thousand other people they promise the same
thing to right right. Well,the other thing too is investors. I've
been doing this for thirty years.Like I mentioned at the top of the
show, investors do not invest withstrangers. If they don't know who you
(22:41):
are, if they've never met you, they're not going to write you a
check for five hundred thousand dollars ora million dollars, just not going to
happen. Now, the companies thatdo these crowdfunding online, they're they're taking
minimum investments of one hundred dollars tofive hundred dollars. Yeah, all right,
if that's what you want to doto raise a few hundred thousand dollars,
you know, it might work ifyou have a proper marketing budget.
(23:04):
But if you're after if you're tryingto raise some serious money, five million,
ten million on up, investors arenot going to write you a check
because of some online information that theysaw, or an email or even a
zoom meeting. Like I said,I've been doing this thirty years. I've
(23:26):
never invested in anything where I haven'tmet the founder. I talked to their
vendors, talk to their employees,I visit their location, and I look
at their checkbook, their bank statements, not just financials, but the bank
statement. I want to know wherethey're spending money, where their checks are
going. I mean, are theyyou know, they're buying a brand new
(23:48):
BMW or you know, Condo andMexico as opposed to running their business.
So I look at the checkbook.So the reason I bring that up is
due diligence is key. So alot of people trying to a lot of
people trying to raise money online arejust fooling themselves that they're going to raise
any substantial Now, I know,I see it all the time where somebody's
(24:11):
raised five million and ten million.That's an exception to the rule. It's
not reality. So for ninety percentof the companies out there, if you're
trying to raise some serious money,you're going to have to have number one,
a marketing budget to get investors tocontact you. You're going to have
to fly to meet the investors orhave them come out and see you if
(24:34):
that's what they want to do.You're going to have to have And this
all requires a one on one meeting. These pitch events that you see all
the time, Angel pitch events coming, you know, pa us five thousand
dollars and you could present to hundredsof investors. That's a bunch of crap.
I've gone to those meetings, andthe reason I've gone there is to
(24:56):
meet other investors, not that notto invent and somebody pitching me. You
know, I go They're to meetYeah, well the investors, although Mike
sometimes they do have good lunches,yeah, yeah, they have none in
the cocktails cocktails too, Yeah,But I mean, like I said,
I've been in this thirty thirty yearsand I've gone to a lot of those
(25:18):
pitch meetings, but only to meetother investors and to discuss current deals that
we're all involved with. None ofus ever write a check to somebody who
pitched us at a meeting or soonafter the meeting. It's just a complete
waste of time. You've got todo this on a one to one basis
in person. If you're trying toraise substantial amounts of money, like I
(25:40):
said, half a million to amillion dollars or more from one investor,
it's not going to happen over theinternet. So to Vicky's point, marketing
is key. Dealing with professionals areis a key element, and getting the
word out there so that investors trustyou. If they don't trust you,
(26:00):
they're not going to invest with you. They need to know, yeah,
they need to know how you're gonnamake money, so they understand how they'll
make money and get the return totheir money their investment capital. So there's
only one way to do that.That's face to face, shaking hands,
looking somebody in the eye. Investorsdo not want to be pitched and they
(26:22):
don't want to be sold. LikeI mentioned early in the show, investors
are educated and they're smart. Theyknow what they want. So all this
junk that you read on the internet, in some of these social media sites
is just that it's junk. It'sit has nothing to do with reality.
It's somebody trying to sell a courseor a list of so called investors,
(26:45):
but it's not reality. Right,kind of takes it, kind of takes
advantage of ignorance, doesn't it.Oh yeah, yeah, I mean,
well, people are looking. Peoplethink raising money is quick, cheap and
guaranteed and easy, and that's that'sanother that's another myth out there. It's
(27:07):
not it's none of the above.You've got to spend money to make money
or to raise money. In otherwords, you've got to pay legal fees,
you got to pay accounting fees,you got to pay pr fees,
marketing fees. And you'd be surprised. I get contacted weekly for people that
are broke that don't want to spendanybody that don't They don't have a legal
offering. Number one, they spenta few thousand dollars to get a fancy
(27:30):
deck put together, and they thinkthat's the tool they can raise money with.
You can't see legal. The otherthing is they they think they can
hire unlicensed finders to go out insource capital and then pay them a commission
or a success fee if the findergets an investor. That's another myth.
(27:52):
It's illegal. First off, unlicensedfinders can't do anything. They can't post
anything on social media. They can'tsend any your material out to anybody,
they can't email anybody, they can'tcall anybody and discuss your deal, and
they cannot advise somebody that it's agood deal. And this is the big
(28:17):
element. They can't conduct due diligence. I see this all the time.
Well, I have a finder who'sdoing due diligence? I said, is
he a licensed broker dealer? No? I said, he can't conduct due
diligence. So the point of bringingthat up is why mess around with a
finder when you run a follow ofsecurity state and federal security laws using a
(28:37):
finder. I mean those are atthe top of the hour. I answered
Ron's question. If the SEC comesafter you, what can they do?
Well, if you use a finderand he's not licensed a lot of broker
dealer investment bank, you've got someserious problems, not only for you,
the issuer of course the finder canbe sucked into it also, but other
(29:00):
usters who got into the deal usingworking with that finder, they also face
problems. So it's a can ofworms. But to your point, VICKI
people are out there trying to raisemoney. They don't know what they're doing.
They think it's fast and cheap,uh guarantee financing, that they put
something up on the internet or socialmedia or a portal or whatever, that
(29:25):
the money is just going to flowin. It's just not reality. Yeah,
and it's that thing that so manypeople fall in that trap. Yeah,
well, you know, Mike,uh, Mark Cuban never never returned
my email, Mark Cuban, Soyou're right, oh yeah, but yeah,
(29:47):
mean do you think that's do youthink that like shows like like shark
Tanks and things like that and allthese things that you see online with these
quote success stories they I think itcontributes to the idea that it is easy
to do, and I think that'swhat a lot of people. Yeah,
yeah, I hear that all thetime from potential people. Well you know,
we tried shark tank or something likethat, and you know, it
(30:08):
just doesn't work. I Mean,shark Tank's there for entertainment, that's that's
really it. And you know,I haven't even watched the show and except
just clips here and there, andI mean, to me, it's you
know, it's entertainment. It's notreality. Investors, real real investors do
not advertise that they're investors. It'salmost like a closed I don't want to
(30:32):
say secret or anything like that,but investors don't put the word out there
like, hey, I got tenmillion dollars to invest send me your deal.
You know. That's typically that's typicallya finder, you know, and
somebody doing factory or bank loans orsomebody somebody else. It's not a real
investor. So again to Vicky's point, people are just uneducated and ignorant.
(30:57):
I hate to use that word,but that's what it comes down to.
And when I try to point outto them what they need to do to
stay out of trouble and what it'sgoing to cost to do it with legal
fees and accounting and everything, it'slike, oh, no, I know
somebody that did it, you know, didn't do all. Well wait a
(31:19):
minute, okay, okay, justbecause somebody did it, violated security laws
and got away with it, doesn'tmean it's legal. Just means they haven't
been caught yet. You know,it's like robbing a bank. You rob
a bank and get away with it, doesn't make it legal, you know,
just you have been caught. Soit's to me it's not worth it.
(31:41):
The jobs app is there for areason. Security laws are there for
a reason. You need to ifyou're raising capital, you need to follow
the rules, and that requires payingthe price to get out there and raise
the money. But it's not aguarantee. I mean, I get this
again. I get a call fromsomebody and they say, can you guarantee
(32:02):
that you'll raise US five million dollars? No, I said, did it
lawyer that put together? Did thelawyer put together your PPM and charge you
twenty five thousand dollars? Did heguarantee that that PPM is going to raise
you money? Well? No,all right, there is no guarantee.
But if you know the one guaranteeit is if you don't, if you
don't try to do it, you'regoing to fail. So I mean you
(32:27):
need to get out there and takethe first step and again having a proper
legal document, complying with state andfederal security law. And this is the
other When I say state if youif you're raising money, each state has
a blue sky requirement that you haveto file in the station you're raising money
(32:49):
and where that investor is located.Now, under some offerings like reggae,
there are exemptions from the blue SkyYou just have to do a notice file.
They can pay a small fee,a few hundred bucks. Other states
require a review of your offering tomake sure it complies with their state security
laws. And you know, Imean that review process go on and on.
(33:14):
So there are state requirements in additionto federal requirements. And again you'd
be surprised how many people don't realizethat. And there are states out there
like Texas, Florida, New Jersey, I think Alaska. There's about seven
or eight states out there that you, as the issuer, cannot raise money.
(33:37):
It all has to be done througha licensed broker dealer. So if
you're trying to raise money in Texasand Florida and New Jersey, you're out
of luck. If you're trying todo it yourself, you know that's when
the state will come after you foroperating as an unlicensed broker dealer. So
again, rules are there for areason. Follow the rules and enjoy their
(34:00):
raise the money, build your business, and get on with life. Quit
looking behind you. No, absolutely, that's that's right. I think we
are scared straight a lot of theissuers who are probably listening to this podcast.
But I hope so, But Ihope so. I hope so,
but I doubt it. I couldjust see the eyes rolling. If this
(34:20):
was television, people say, ohGod, listen to this guy. Go
on. You know, I don'thave to do that, you know,
I know people that didn't do Yeah, well, you know, go ahead,
but yeah, well, you know, before before we close this out,
Mike, let's let's I got onemore question for you in terms of
Yeah, you mentioned you mentioned videosand press releases and things that you're supposed
to do the right way, right, all right, So when you create
(34:43):
these press releases and you create thevideos and all these other marketing ideas,
uh, they got to go somewhere, right, they got to be where
where where do people go to actuallypost these things? Did they just go
to a major PR service or dothey go to YouTube or or what's what's
the right? Yeah, that's agood point. I mean, well,
first off, you know, thereare public relations firms out there investor relation
(35:07):
firms that can take on the jobof not only producing your media pieces,
but also getting it out there tothe public. Like Fox. I've had
clients to be on Fox Business,interviewed on Fox Business on TV, and
press releases. I don't do thepress releases, but I work with the
(35:29):
company and their lawyers to you know, craft the press release to make sure
it's has all the right information init, no fluff and in everything like
that. And then video like YouTube, you can hire a production company to
produce a nice video and then thatcan be emailed. If you have a
list of people, you can emailit to them or put posted on social
(35:52):
media. So there are a lotof avenues out there for distribution. But
a lot of companies don't know that. I mean, they don't have a
clue that you know they need todo that. I mean, I tell
people again, how was somebody supposedto write you a check? If they
don't know who you are, ifthey don't know what you're offering, I
(36:12):
mean, without right the exposure,it's you're just wasting time. Even if
you put all the legalities together andhave an offering, if you don't have
a marketing budget to reach out toinvestors. You're just wasting your time.
Yeah. I had I had acontact telling me the other day that they
just produced a promotional five minute videoon their latest offering, and he sent
(36:37):
me a link to it, andI looked at it and I feel like
telling them, you know, youshould put this in the CVS pharmacy under
sleeping pills. Yeah it was written. I mean, come on a lot,
Yeah, a lot of people,a lot a lot of entrepreneurs founders
are terrible at public speaking and doinga yeah, doing a video and you
(37:00):
know, if they they should hirea professional to do it. And again
a lot of these companies they thinkthey can just put anything in a video,
true or false, a fluff pieceor a fact. They can just
do anything, and you can't.You've got to be straightforward, factual,
transparent and everything with your information andputting out there. And again that comes
(37:23):
back to the PPM and the legaldocuments that you need. Those are disclosure
documents that tell the investor what they'regetting into. If you're doing that,
but you're also putting out a videothat says the opposite that hey, this
is guaranteed we're going to pay youthirty percent interest. You know, we're
going to do this and this.If you go on and on on your
(37:44):
video and it's not in your PPMand it's not this clo I mean,
you've got a real issue there withregulators. So you know, there's the
right way in the wrong way todo marketing and promotion. And again,
some of these online platforms tell youthat they market you're offering. Again,
they don't. What they do isonce you sign up to do their platform,
(38:06):
they'll refer you to somebody that marketsform. But that's a separate fee.
People don't realize that for every everymillion dollars you're trying to raise,
you have to have ten to fifteenthousand dollars as a budget for every million
dollars you're trying to raise, andif you don't, you're going to fail.
Yeah, speaking of talking to professionals, Mike, uh, how do
(38:30):
people get a hold of you?What's the what's the best way to come
out? I mean, they canthey contact me on my phone nine to
five to one, two three sixeight four seven three. They can email
me Mike Burrett at gmail dot com. They can go to my LinkedIn page
under Michael Barrett see my profile andlook up you know how we how we
(38:50):
do things and what we do,and they can contact me through LinkedIn as
well. Yeah, I think Ithink I'm gonna title this podcast listen to
this podcast or go to jail.Yeah. That's that's that's that that rings
true in a lot of cases,because I mean, I can't emphasize it
enough, and when I talk topeople, it just I could it just
(39:14):
goes in one ear and out theother and then you know, then I
see you on the internet. SECclosed down this, They closed down that
they're going. I mean you seeit all the time in the SEC bulletin,
So closing people down for not havinga registered offering. So it happens.
So this is really good information.Vicky. You want to close us
out with a commodore question. Yeah, this is great. You know,
(39:37):
you want to have a successful business, you got to do certain things.
You got to take the high road, You got to operate with integrity at
all times no matter what. Youhave to be passionate about what you're doing,
about what your business represents and theproduct that you have. And most
important, absolutely most important, hireexpert professionals lawyers see Financial Advisor CPAs to
(40:08):
help you be successful because you cannotdo it yourself. It's the purpose of
Mappable USA. We do podcasts toteach our listeners the right way, to
give them the opportunity to contact theexperts and professionals that everybody needs to have
(40:28):
a successful business. And Mike absolutelyis one of our best guests because he
is an absolute expert when it comesto raising money and he can help you.
He has the right ways to doit. You need to call him
and you need to ask him tohelp you and you'll be successful. It's
a no brainer. Just do it, and we'd like you thanks for that.
(40:52):
I appreciate it. Yeah, Iappreciate that. I enjoy doing the
podcast too, So anytime you needthe guests, just give me a call.
Thanks. Thank you for being aguest on today's show, and Vicky,
thanks for co hosting this with me. And folks are listening to the
Mappable USA podcast at MAPPLEPLEUSA dot com. If just go to our website,
scroll down, you'll see all oursyndication sources and just pick the one you're
(41:14):
like best, subscribe and you'll nevermiss another one of our episodes. Might
be a guest on the show,like Mike Web Today sell off the guest
pad there. We'll see what youcan do about getting you on the show,
and if you like with You're HeartToday, send us an email at
info at mappableusa dot com or justleave a comment on whatever page you listen
to this on right now, Sothanks for your support, thanks for listening.
(41:35):
We'll be at you next time withanother Mappable USA podcast. Have a
great week everyone,
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